Section 68 addition on demonetisation cash deposits deleted where sales, stock records and VAT filings supported the books.

ITAT Jaipur held that cash deposits during demonetisation were not unexplained under section 68 where the assessee had recorded sales in regular books, supported them with stock and VAT records, and the books were not rejected. Mere suspicion about the timing or volume of cash sales was held insufficient in the absence of concrete defects in the purchase or sales records. On those facts, the consequential levy under section 115BBE also did not survive, and the addition was deleted.

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Issues: Whether the addition under section 68 of the Income-tax Act, 1961 on account of cash deposits made during the demonetisation period was sustainable when the assessee had recorded sales in regular books, supported the transactions with stock and VAT records, and the books were not rejected.

Analysis: The cash deposits were treated as unexplained only because they were made during the demonetisation period and the Assessing Officer doubted the genuineness of the sales. The appellate record showed that the assessee had opening stock, regular business activity, current bank accounts, VAT returns, and recorded sales entries. No concrete defect in the purchase or sales records was brought on record, and the books of account were not rejected. On these facts, mere suspicion about the volume and timing of cash sales was held insufficient to invoke section 68, and the consequential levy under section 115BBE did not survive.

Conclusion: The addition under section 68 was not justified and was rightly deleted; the Revenue's challenge failed.

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